Advance Payment Notices (APNs) are here to stay

The High Court has heard a Judicial Review that was looking to challenge whether APNs are lawful.

Taxpayers who had received APNs argued that the notices were unreasonable, breached natural justice and contravened the EU Convention on Human Rights. The Court dismissed these arguments and decided in favour of HMRC.

What does this now mean for clients faced with an APN?

Background to APNs

HMRC can issue an APN where a taxpayer has used a disclosable tax avoidance scheme and HMRC has either opened an enquiry into the taxpayer’s relevant return or has made an assessment that is under appeal.  The APN forces the tax saved by the scheme to be paid in advance of the issue being decided by the courts. The tax must be paid no more than 90 days after the APN is issued.

There is no right of appeal against an APN. It is possible to make representations to HMRC within 90 days of the notice, which will be reviewed by an independent officer. However, such representations are only likely to be successful in dealing with obvious errors e.g. incorrectly computed liabilities, factual errors, etc.

There are significant consequences for failing to pay on time. A penalty equal to 5% of the tax will be charged if the APN is not paid by the 90 day deadline with additional penalties of 5% charged after a further 5 and 11 months.

What you should do if you or your client receives an APN:

HMRC has threatened to issue 64,000 notices by April 2016 worth £5.5 billion. The financial consequences for clients in receipt of an APN could therefore be extremely burdensome.

It is important to seek expert advice as the issues posed by APNs can be very challenging to resolve.  We have direct experience in dealing with HMRC on this issue and can help in a number of ways, including:

  1. Checking the validity of any APN. Has HMRC followed the correct procedures in its enquiry and in issuing the APN?
  2. Exploring settlement opportunities. Sometimes this can lead to a better outcome.  Enquiries often lead to logjams such as HMRC holding back tax repayments or access to other reliefs.  Engaging a third party negotiator can often ease these tensions.
  3. Seeking time to pay arrangements. This would prevent the late payment penalties being charged. Time to pay arrangements can be difficult to secure and so starting the process early will offer more chance of success.

 

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